The shocking story in this week’s Financial Times had this lead: “Call center workers are becoming as cheap to hire in the U.S. as they are in India.” High unemployment in the U.S. has forced down wages for low-paid workers in the U.S. so that in many cases Americans are cheaper to hire than those in a country where most people live on less than $8.00 per day.
For 90 days, workers at the upstate New York Mott factory (owned by Dr Pepper Snapple) have been striking to stop a $1.50 cut in pay, pension contributions, and other givebacks in the face of healthy company profits. Unlike other companies that have gotten drastic pay cuts from union members when they opened their books to prove their economic distress—GM, Ford, Chrysler, Goodyear tire company—Dr Pepper Snapple admits they can afford to pay; but they argue (I imagine some with some smugness) that unemployment is so high that competition between desperate workers will boost profits further as workers accept less pay to get and keep a job.
People have to understand how difficult the decision to strike is: you forgo a paycheck and pension contributions and threaten your health-insurance coverage. Passions and convictions run high. New York Times reporter Steven Greenhouse captures that when he quotes a striker: “‘It’s disgusting, honestly, that they want to take things away from the people who made them profitable,’ said Ms. Muoio, a $19-an-hour machine operator who has worked at the plant 15 years.”
Common in these illustrations is the danger of endorsing market fundamentalism and “free” trade without shoring up institutions that protect labor standards and union rights. The EU took the opposite approach when the European Union phased in integration over decades to ensure that Portuguese workers wages moved up to German standards, and not the other way around.
Only before the Great Depression did economists think letting unemployment driving down wages was a good thing.
It’s not.
Falling wages is a bad thing, a very bad thing. Even if you are channeling gilded age Jay Gould—who said, “I can hire half of the working class to kill the other half”—you must concede that if workers don’t buy stuff, there is more unemployment, which means even lower wages, leading to more unemployment, in a spiral downward of recession and depression that eventually means you won’t be able buy stuff, no matter how cheap it is.
Harvard Economist Richard Freeman wrote a provocative article back in the day when there was a labor movement to articulate why NAFTA and giving China privilege in the World Trade Organization etc. would bring down American living standards unless the over a billion peasants had access to free speech and freedom of assembly (and thus form independent free and effective trade unions). The article is called “Are Your Wages Set in Bejing.” He speculated that without strong unions and labor protections, 2 billion peasants and unemployment would flatten living standards and take economies down with them.
He was right.
15 Responses to Striking Mott Workers; U.S. Call Centers
livefreeordie2 - August 23, 2010 at 7:04 am
One’s skill sets – labor – is a product for sale just like any other product. Sometimes, the value of a product goes up – sometimes, it goes down. These people have jobs – something millions of other people don’t have, thanks to Obama’s policies that have been wasting money by the trillions and creating uncertainty sufficient to keep capital on the sidelines. They should be thankful that they still have jobs. And they should go back to work, or. . .Mott should give them a date certain to return for the wages offered. If they fail to do so, then like the workers in the Shaw’s Supermarket strike, they should be fired and replaced by people willing to work. The company will pay what the labor is worth. We will know if they are correct if they can find new employees who will perform the labor for the wages Mott wants to pay. If current employees don’t like it – if they believe their labor is worth more – they can go elsewhere. Let them go to the employers who will pay them what they believe they are worth. This is economics – it ain’t rocket science. Go back to work or get out. . .it’s that easy.
mbelvadi - August 23, 2010 at 8:27 am
Labor during a period of unemployment seems to fit a “tragedy of the common ground” (TOTCG) scenario – it’s to each company’s marginal benefit to reduce workers’ pay as much as they can, because the demand for their products comes from a far larger pool of people than their own workers, but that same logic holds true for almost every consumer-product company, and if they all do it, they’ll all find that they’ve all lost the consumer base to buy their products and the whole economy spirals down. That’s exactly why government intervention is needed in any TOTCG economic situation, and why the gutting of the post-Depression system of labor laws in the US over the last several decades has been a macroeconomic disaster waiting (for a downturn like this?) to happen. Now might be a good time to look at how you can shift your retirement portfolio away from American consumer stocks into international investments.
iris411 - August 23, 2010 at 9:10 am
So socialism is better than capitalism after all?
alvitap - August 23, 2010 at 9:37 am
The U.S. business sector (and the citizenry) has benefitted tremendously from Keynesian economics–you remember, the good old days when families could get by on one pay check, when business-paid health insurance was more prevalent, when the American standard of living didn’t mean having to get by using food stamps.Then, Richard Nixon cracked open the Chinese labor market with ping-pong diplomacy. Remember? Then, our dreams came true. We smashed “Red Chinese” communist totalitarism and sent our industrial production sites there. What a victory?Now, the party is over for American Labor.Instead of burning their Wal-Mart commodities in effigy, American workers are told to hate border crossers. Not being cheap enough, apparently, “Made in America” businesses are buying their labor in China.It doesn’t matter where OR in what you work, the suppression of wages is “leveling the standard of living.” The unemployed in the U.S. is not a free markert. Workers have been abandoned.The national labor market that “livefreeordie2″ is referring to was destroyed by the Freidman and the other economic anarchists who reside among us.Yeah, American socialism is better than capitalism.
mvclibrary - August 23, 2010 at 10:07 am
Why is it that no one ever asks why American wages are so much higher than those in China and India in the first place? After all, if socialism is so hot, China and India have had the “benefit” of much more of it than the U.S. has had, yet their standards of living were fairly low until they adopted elements of capitalism.
swish - August 23, 2010 at 10:07 am
There’s really no need for “livefreeordie2″ to ever write a comment anymore. He/she can just type in “it’s me” and when we see the handle, we can all pretty much guess the implied content.There was a bit left out of this post, though: “And they should go back to work, or ….”… drop dead?
mariemrafa - August 23, 2010 at 10:39 am
When I read articles like this and see comments like the first one from livefreeordie2, I just think, “It must be nice to be on a pedal stool away from us common folk.” This could easily happen to anyone, and I know I won’t take a pay cut when I’ve been offered more from the start. It’s not fair that these companies can afford to pay their employees and somehow don’t care to do the right thing. As the article stated, it’s only hurting everyone in the long run, and we need to look for a long term solution if we are ever going to get out of this economic hole. Profits are one thing, but longevity and stability matter more.
livefreeordie2 - August 23, 2010 at 11:58 am
swish #6 – Nonsense. I said they should take the decrease or go find someone else who was willing to pay what they want. There is nothing about dropping dead. Oh. . . and if there’s no one willing to pay them what they want? Then we know that Mott had it right from the beginning.mariemrafa #7 – That’s the beauty of living in America. You don’t have to accept a pay cut. You can quit and go elsewhere.
_perplexed_ - August 23, 2010 at 12:11 pm
…and I don’t have to buy Dr. Pepper/Snapple, and now I won’t.
stinkcat - August 23, 2010 at 1:15 pm
I have no problem with workers going on strike, so long as the employer has the right to hire someone else to do the same job if they desire. If someone else is willing to do the same job for less, why shouldn’t we let them? If target is selling cat litter cheaper than walmart, then walmart loses my business. Why should labor be any different?
dank48 - August 23, 2010 at 1:59 pm
Stinkcat, And if an adjunct is willing to do your job for less, why not let them, right?
stinkcat - August 23, 2010 at 2:40 pm
If I went on strike and refused to perform my job, then I think it would be perfectly appropriate to hire an adjunct to do my job for less.
alvitap - August 23, 2010 at 7:51 pm
Stinkcat,You are one of those jittery assistants in economics, right? It must be perfectly emasculating to hold onto your humanity spouting this drivel.
stinkcat - August 23, 2010 at 11:06 pm
Alvitap,I am not sure what you mean by jittery assistants. However, I do teach economics.
trendisnotdestiny - August 24, 2010 at 11:33 pm
@ mvclibrary,India and China are nascent economies benefitting from one of the central factors in global capitalistic marketplace: abundance of labor drives down prices for capital and promotes higher rates of exported GDP growth…. It is no mistake that our golden era of economics occurred during the biggest post WWII population growth spurt in our nations history. Large middle class populations in nation states leverages capital and employs labor. The reason we are less competitive in the labor market is that we have a less abundant, over-expensive and under-educated labor force relative to the world (Krugman, 2007). The real question that needs to be asked is why did our economic system shift so drastically in the stagflationary markets of the 1970′s… It has been this “neoliberal turn” that has brought about massive bubbles of wealth and poverty, always moving towards greater disparities between those with resources and those without… It appears that few of us have really been willing to address the major implications from the neoliberal turn:1) Concentration of wealth/resources among the few2) Financial Inequality: Income, Assets, Tax Laws & Offshoring3) Dearth of a rise in living wages from mid 1970 to present4) Enormous appetite and growth of debt at all levels5) Severing of the collective and public arteries6) Industry run policies and oversight